(12) Share-based Compensation

The 2013 Equity Plan authorizes the issuance of various types of share-based awards to the Company’s employees, officers, directors, and other eligible participants. As of December 31, 2016, the total number of shares of the Company’s class A common stock authorized for issuance under the 2013 Equity Plan was 1,700,000 shares.

During 2016, stock options to purchase an aggregate of 45,000 shares of class A common stock were granted to certain Company employees and directors pursuant to the 2013 Equity Plan. As of December 31, 2016, there were options to purchase 885,833 shares of class A common stock outstanding under the 2013 Equity Plan. As of December 31, 2016, there were 602,500 remaining shares of class A common stock authorized for future issuance under the 2013 Equity Plan.

Shares issued under the 2013 Equity Plan may consist in whole or in part of authorized but unissued shares or treasury shares. No awards may be issued more than ten years after the 2013 Equity Plan’s effective date. Stock options that are granted under the 2013 Equity Plan must have an exercise price equal to at least the fair market value of the Company’s class A common stock on the date of grant, become exercisable as established by the Board of Directors or the Compensation Committee, and expire no later than ten years following the date of grant. The Company recognizes share-based compensation expense associated with such stock option awards on a straight-line basis over the award’s requisite service period (generally, the vesting period). The stock option awards granted to date vest in equal annual installments over an approximately four-year vesting period (unless accelerated upon a change in control event (as defined in the stock option agreement for the applicable award) or otherwise in accordance with provisions of the 2013 Equity Plan or applicable option agreement).

Share-based compensation expense is based on the fair value of the stock option awards on the date of grant, as estimated using the Black-Scholes option pricing model. The Black-Scholes option pricing model requires the input of certain management assumptions, including the expected term, expected stock price volatility, risk-free interest rate, and expected dividend yield. The Company estimates the term over which option holders are expected to hold their stock options by using the simplified method for “plain-vanilla” stock option awards because the Company’s stock option exercise history does not provide a reasonable basis to compute the expected term for stock options granted under the 2013 Equity Plan. The Company relies exclusively on its historical stock price volatility to estimate the expected stock price volatility over the expected term because the Company believes future volatility is unlikely to differ from the past. In estimating the expected stock price volatility, the Company uses a simple average calculation method. The risk-free interest rate is based on U.S. Treasury securities with terms that approximate the expected term of the stock options. The expected dividend yield is based on the Company’s past cash dividend history and anticipated future cash dividend payments. The expected dividend yield is zero, as the Company has not previously declared cash dividends and does not currently intend to declare cash dividends in the foreseeable future. These assumptions are based on management’s best judgment, and changes to these assumptions could materially affect the fair value estimates and amount of share-based compensation expense recognized.

The following table summarizes the Company’s stock option activity (in thousands, except per share data and years) for the periods indicated:

	Stock Options Outstanding
				Weighted Average		Aggregate		Weighted Average
				Exercise Price		Intrinsic		Remaining Contractual
	Shares			Per Share		Value		Term (Years)
Balance as of January 1, 2014		600		$	92.84
Granted		745			125.46
Exercised		(9	)		92.84	$	653
Forfeited/Expired		(135	)		104.48
Balance as of December 31, 2014		1,201		$	111.77
Granted		380			178.93
Exercised		(91	)		105.25	$	6,367
Forfeited/Expired		(167	)		131.31
Balance as of December 31, 2015		1,323		$	129.04
Granted	45			189.62
Exercised		(112	)	97.82		$	8,102
Forfeited/Expired		(370	)	110.28
Balance as of December 31, 2016		886		$	143.89
Exercisable as of December 31, 2016		345		$	135.25	$	21,520	7.6
Expected to vest as of December 31, 2016		541		$	149.39		26,303	7.9
Total		886		$	143.89	$	47,823	7.7

Stock options outstanding as of December 31, 2016 are comprised of the following range of exercise prices per share (in thousands, except per share data and years):

	Stock Options Outstanding at December 31, 2016
			Weighted Average		Weighted Average
			Exercise Price		Remaining Contractual
Range of Exercise Prices per Share	Shares		Per Share		Term (Years)
$117.85 - $120.00		30	$	118.63	7.3
$120.01 - $150.00		510	$	121.43	7.3
$150.01 - $180.00		216	$	167.21	8.2
$180.01 - $201.25		130	$	198.99	8.8
Total		886	$	143.89		7.7

An aggregate of 222,500, 283,750, and 150,000 stock options with an aggregate fair value of $13.7 million, $14.2 million, and $6.3 million vested during the years ended December 31, 2016, 2015, and 2014, respectively. The Company expects all unvested and outstanding options at December 31, 2016 to fully vest in future years in accordance with their vesting schedules. Therefore, share-based compensation expense has not been adjusted for any expected forfeitures.

The weighted average grant date fair value of stock option awards using the Black-Scholes option pricing model was $75.54, $73.86, and $55.84 for each share subject to a stock option granted during the years ended December 31, 2016, 2015, and 2014, respectively, based on the following assumptions:

	Years Ended December 31,
	2016	2015	2014
Expected term of options in years	6.3	6.3	6.3
Expected volatility	38.5%	39.0% - 40.2%	41.5% - 42.5%
Risk-free interest rate	1.4% - 1.6%	1.5% - 2.0%	2.1% - 2.3%
Expected dividend yield	0.0%	0.0%	0.0%

The Company recognized approximately $11.8 million, $17.3 million, and $11.8 million in share-based compensation expense for the years ended December 31, 2016, 2015, and 2014, respectively, from stock options granted under the 2013 Equity Plan. As of December 31, 2016, there was approximately $25.7 million of total unrecognized share-based compensation expense related to unvested stock options. As of December 31, 2016, the Company expected to recognize this remaining share-based compensation expense over a weighted-average vesting period of approximately 2.0 years.

During the years ended December 31, 2016 and 2015, the Company was able to recognize and utilize net operating loss carryforwards arising directly from tax deductions related to equity compensation in excess of compensation recognized for financial reporting that was generated in the current and/or prior year under the 2013 Equity Plan. Accordingly, stockholders’ equity increased by $1.2 million and $1.1 million during the years ended December 31, 2016 and 2015, respectively. No windfall tax benefit was realized from the exercise of stock options during the year ended December 31, 2014.

During the year ended December 31, 2016, the Company wrote off $1.7 million of deferred tax assets related to certain vested stock options that were no longer exercisable. Accordingly, additional paid-in capital decreased by $1.7 million during the year ended December 31, 2016. No such adjustment was made during the years ended December 31, 2015 and 2014.

During the year ended December 31, 2016, the Company paid $3.7 million to tax authorities related to the net exercise of a stock option under the 2013 Equity Plan. This payment resulted in a $3.7 million reduction to additional paid-in capital during the year ended December 31, 2016. No net exercises of stock options were made during the years ended December 31, 2015 and 2014.